The principle of diversification tells us that: Concentrating an investment in two or three large stocks will eliminate all of the unsystematic risk. Concentrating an investment in three companies all...


The principle of diversification tells us that:<br>Concentrating an investment in two or three large stocks will<br>eliminate all of the unsystematic risk.<br>Concentrating an investment in three companies all within<br>the same industry will greatly reduce the systematic risk.<br>Spreading an investment across many diverse assets will<br>reduce some of the total risk.<br>Spreading an investment across many diverse assets will<br>eliminate all of the systematic risk.<br>Spreading an investment across five diverse companies will<br>not lower the total risk.<br>

Extracted text: The principle of diversification tells us that: Concentrating an investment in two or three large stocks will eliminate all of the unsystematic risk. Concentrating an investment in three companies all within the same industry will greatly reduce the systematic risk. Spreading an investment across many diverse assets will reduce some of the total risk. Spreading an investment across many diverse assets will eliminate all of the systematic risk. Spreading an investment across five diverse companies will not lower the total risk.

Jun 11, 2022
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